October 29, 2009

The simple math of green jobs

Climate change presents a global crisis, but "can also provide an economic opportunity of vast proportions," Dan Reicher, director of climate change initiatives at Google told the Senate Committee on Environment and Public Works.

Besides creating new jobs in solar, wind and geothermal power, he said national regulation of greenhouse gases could help push investments to develop an efficient and robust power grid that would combine with information from the Internet.

That would create new jobs in new technologies across a range of companies, he said. The Web could send information from the "smart grid" to help consumers save money on power bills during peak demand periods and help them determine the cheapest time to charge electric cars that would cut emissions and oil imports.

I agree.

But Bill Klesse, the chief executive of oil refiner Valero Energy Corp, told the panel the bill would cut jobs in his industry because it would force companies to buy billions of dollars worth of carbon credits. He said the costs would hurt refiners who have already lost jobs as the recession cuts fuel demand.

I agree with that too.

Let's explore the math Env-Econ style (That is, let's make a simple problem complicated but witty--that's what we academic-blogging-types do)...

Let P be the total number of potentially employable people in the U.S. Define a person's employment status in one of three ways: Green (G), Brown (B) or Unemployed (U), where by definition a brown job is any job that isn't green and for now we are ignoring transitional unemployment, so in times of full employment, U=0. Combining everything we get what I will call the Job/Unemployment Identity and Creation Equation (JUICE):

P=G+B+U

So how does job creation work? Consider 2 cases:

Case 1: Full employment (U=0). When we are in a situation of full employment, JUICE concentrates (get it?)to:

P=G+B

Now suppose the government invests in a green job creation program so that G increases by g. To maintain the JUICE, B must decrease by g (unless of course the government can somehow increase P. And although I'm not a scientist, last time I checked, creating P is still beyond our current technologies*).** In words, any increase in Green Jobs has to be countered by losses in Brown Jobs in times of full employment. The net result? No net job increase.

Case 2: Unemployment (U>0). Introducing unemployment into the mix makes this more complicated. Now the government's green job creation program has two sources from which to draw jobs: B and U. To balance JUICE, the net change in B and U must now equal g***. But, U had to come from somewhere. Since we are trying to create green jobs it seems logical that we are starting from a situation in which there are very few G jobs even in times of full employment, so most U must come from B. Assuming all U comes from B, then G comes from U which came from B. Nevertheless, the end result is no net job increase.

So what do we end up with? In either case, we get more G, less B and no more P.

To simplify this whole discussion, the simple math of green jobs is this: 1-1=0.

**I would've done this whole thing in differential calculus, but when John and I started this blog we forgot to put the Calculus for Dummies prerequisite on the syllabus. So I relegate the differential calculus presentation to technical appendices.

Technical Appendix A: Squeezing JUICE (get it?), we can take the total differential of JUICE and get: 0=dG+dB. Rearranging yields: dG=-dB.

Comments

Climate change presents a global crisis, but "can also provide an economic opportunity of vast proportions," Dan Reicher, director of climate change initiatives at Google told the Senate Committee on Environment and Public Works.

Besides creating new jobs in solar, wind and geothermal power, he said national regulation of greenhouse gases could help push investments to develop an efficient and robust power grid that would combine with information from the Internet.

That would create new jobs in new technologies across a range of companies, he said. The Web could send information from the "smart grid" to help consumers save money on power bills during peak demand periods and help them determine the cheapest time to charge electric cars that would cut emissions and oil imports.

I agree.

But Bill Klesse, the chief executive of oil refiner Valero Energy Corp, told the panel the bill would cut jobs in his industry because it would force companies to buy billions of dollars worth of carbon credits. He said the costs would hurt refiners who have already lost jobs as the recession cuts fuel demand.

I agree with that too.

Let's explore the math Env-Econ style (That is, let's make a simple problem complicated but witty--that's what we academic-blogging-types do)...

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